Case Study
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Unknown 4% Attire/Linen 1% Capital Medical 3% Subscriptions 10% Supplies/ Other 1% Other 9% Printed Material 0% Office 2% Drug Related 12% Facilities 9% Food 1% Gas 0% Maintenance 0% Lab 0% Technology 13% Med/Surg 31% TOTAL SPEND AREAS OF POTENTIAL OPPORTUNITY Attire/Linen $1,104,813 Supplies/Other $2,110,902 Drugs $24,224,211 Facilities $19,162,339 Lab $8,612,108 Med/Surg $64,833,950 Phase: 1 23 Data Normalization Wheaton Franciscan Healthcare is one of the largest integrated regional health care delivery systems serving Iowa, Illinois and Wisconsin and one of the most tightly run. In fact, the system recently received the ECRI Institute Supply Chain Award—one of only five recipients out of nearly 2,500 hospitals and health systems using ECRI’s supply chain services. Yet, Wheaton recognized that it was still missing opportunities for savings. So it partnered with McKesson to become the first system to utilize McKesson Strategic Supply Sourcing. Case Study Customer: Wheaton Franciscan Healthcare, Glendale, Wisconsin Sites: 100 (including 18 hospitals, 70 clinic sites, three long-term care facilities and more than 3,400 physicians) Total Spend: $220,803,723 McKesson Supply Chain Suite: McKesson Strategic Supply Sourcing, Horizon Enterprise Materials Management, IntelliShelf Point of Use “It’s a paradigm shift in how we’re going to purchase things and how we look at products…we’ll have complete transparency on what our spend is and what the universe of product is out there.” Joe Volpe, VP Supply Chain Wheaton Franciscan Healthcare This case study represents the opportunities identified in Phase 1 of our 3-part strategy for identifying savings with McKesson Strategic Supply Sourcing: Phase 1: Normalize Data Phase 2: Synchronize GPO Contracts Phase 3: Clinician-Defined Formularies & Procurement
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Unknown 4%Attire/Linen 1%
Capital Medical 3%
Subscriptions 10%Supplies/Other 1%
Other 9%
Printed Material 0%
Office 2%
Drug Related 12%
Facilities 9%
Food 1%Gas 0%
Maintenance 0%
Lab 0%
Technology 13%
Med/Surg 31%
TOTAL SPEND AREAS OF POTENTIAL OPPORTUNITY
Attire/Linen $1,104,813Supplies/Other $2,110,902
Drugs $24,224,211
Facilities $19,162,339
Lab $8,612,108
Med/Surg $64,833,950
Phase:123Data Normalization
Wheaton Franciscan Healthcare is one of the largest integrated regional health care delivery systems serving Iowa, Illinois and Wisconsin and one of the most tightly run. In fact, the system recently received the ECRI Institute Supply Chain Award—one of only five recipients out of nearly 2,500 hospitals and health systems using ECRI’s supply chain services. Yet, Wheaton recognized that it was still missing opportunities for savings. So it partnered with McKesson to become the first system to utilize McKesson Strategic Supply Sourcing.
Case Study
Customer: Wheaton Franciscan Healthcare, Glendale, Wisconsin
Sites: 100 (including 18 hospitals, 70 clinic sites, three long-term care facilities and more than 3,400 physicians)
Total Spend: $220,803,723
McKesson Supply Chain Suite: McKesson Strategic Supply Sourcing, Horizon Enterprise Materials Management, IntelliShelf Point of Use
“It’s a paradigm shift in how we’re going to purchase things and how we look at products…we’ll have complete transparency on what our spend is and what the universe of product is out there.”
Joe Volpe, VP Supply ChainWheaton Franciscan Healthcare
This case study represents the opportunities identified in Phase 1 of our 3-part strategy for identifying savings with McKesson Strategic Supply Sourcing:
Phase 1: Normalize DataPhase 2: Synchronize GPO
ContractsPhase 3: Clinician-Defined
Formularies & Procurement
PHASE I PRELIMINARY OPPORTUNITIES
AREA
IDENTIFIED SAVINGS TO DATE*
PROJECTED ANNUALIZED SAVINGS
Price Line / Product Variance $900,000 $1,890,000
Contract Price Variance $45,000 $180,000
Product / Vendor Standardization (Based on 5% reduction over 20% of Med Surg / Lab Spend)
$1,468,920
Distribution / Service Fee Reduction (Based on 3% reduction of 10% of Cardinal Distribution fee)
$123,680
Total Annualized Savings Phase I $3,572,600
*It took two months to normalize and analyze this data to achieve this summary.
DIVING DEEPER INTO PRICE AND PRODUCT VARIANCE
So what is making up the $900,000 in price line and product variance? McKesson Strategic Supply Sourcing uncovered a large spend against non-catalog items, with some items being purchased up to 5 times. This offers opportunity for Wheaton to put these repeat purchase items on contract, and also flags the need to reduce the number of Blanket Orders for areas such as Laboratory and Pharmacy.
Additionally, the system uncovered $5 million in spend where the PO did not match the invoice, representing a potential process issue between Accounts Payable and Purchasing that could translate to over- and under-payments to vendors. The data supplied by McKesson Strategic Supply Sourcing will give Wheaton better visibility into correcting the problem.
Keep in mind, this is only the preliminary findings in Phase 1. Additional saving opportunities will be uncovered as we complete Phase 1 and move forward into Phases 2 and 3.
NON-CATALOG SPEND – ALL CATEGORIES
ITEM
NUMBER OF TIMES PURCHASED
NUMBER OF ITEMS DOLLAR SPEND
Non-File Item 1 Time 60,557 $126,699,308.80
Non-File Item 2 Times 383 $1,872,643.72
Non-File Item 3 Times 122 $615,995.74
Non-File Item 4 Times 111 $1,309,615.73
Non-File Item 5 Times 383 $10,533,836.78
Total 61,556 $141,031,400.77
PURCHASE ORDER TO INVOICE VARIANCE ANALYSIS
CRITERIA INVOICE ($) PO LINE COUNT TOTAL PO SPEND TOTAL
Purchase Order Total = Invoice Total 216,599 $169,923,596.69 $169,923,596.69
Purchase Order Total < Invoice Total 5,154 $3,128,532.98 $2,334,440.48
Purchase Order Total > Invoice Total 5,794 $2,353,027.23 $2,699,773.89
Total Unmatched Spend $5,034,214.37
“You have the whole gammet of information you need to really make a wise decision.”
Terri Kendrick, Director, PurchasingWheaton Franciscan Healthcare
Confidential: For Internal Use Only May, 2012
